Case BriefsHigh Courts

Allahabad High Court:  Stating that the word ‘manufacturing process’ has been expansively defined under the Factories Act even to include Printing Press activity as a manufacturing process whereas in common parlance Printing Press cannot be termed as a ‘manufacturing process’, Pankaj Bhatia, J., held that, the term ‘manufacturing process’ was added to the ESI Act after the 1989 Amendment, hence, there would be no application of the said term prior to the said amendment.

Instant petition was filed to quash certain orders and recovery certificates whereby the demands had been quantified against the petitioners and they had been directed to pay the said amount in the exercise of the powers conferred under the Employees State Insurance Act, 1948.

Factual Background

The petitioner was an apex cooperative society created under Section 2(a—4) Clause 3 of the U.P. Cooperative Societies Act, 1965.

Further, it was stated that the rules, regulations and guidelines issued by the State Government were normally applicable to the employees of the petitioner’s society and they enjoyed certain benefits which were admissible to the employees of the State Government.

Petitioner has been running P.C.F. Press and the persons employed in the accounts section were enjoying the benefits of the State Government from time to time which according to the petitioner were far superior to the benefits flowing to the persons who came under the ‘ESI’ Act.

In 2003, respondent 1 issued a show-cause notice calling upon the petitioner to show cause as to why the petitioner’s society should not be made liable for payment of the contribution to the ESI Fund, to which the petitioners raised their objections.

Point for Consideration

Whether the petitioners’ establishment would be covered within the ambit of ‘ESI Act’ by virtue of the mandate of Section 1(4) of the ESI Act as the parties are not at issue that no notification has been issued under Section 1(5) of the Act?

Analysis and Decision

In the present matter, the demand was raised for an amount of Rs 33,846 for the employer’s contribution for the employees working in the account section of PCF Press for the period January 1981 to September 1986 and from January 1988 to May 1989.

Hence, the demand pertaining to the period prior to 20-10-1989 when the definition of ‘manufacturing process’ under Section 2(14-AA) was inserted under the ESI Act.

After the amended Act No. 29 of 1989, the word ‘manufacturing process’ has been expansively defined under the Factories Act even to include Printing Press activity as a manufacturing process whereas in common parlance Printing Press cannot be termed as a ‘manufacturing process’.

Therefore, the Court held that, the applicability of the provisions of ‘ESI Act’ on the petitioner would clearly not be covered by Section 1(4) of the ‘ESI Act’ for the period prior to 21-10-1989 and thus, the demand was not justified.

In view of the above discussion, petition was allowed. [U.P. Cooperative Federation Ltd. v. Employees State Insurance Corporation, 2022 SCC OnLine All 227, decided on 20-4-2022]

Advocates before the Court:

Counsel for Petitioner:- Shireesh Kumar

Counsel for Respondent:- Shishir Pradhan

Telangana High Court
Case BriefsHigh Courts

Telangana High Court: G Radha Rani, J., disposed of the petition and directed the petitioner to approach the EI Court under Section 75 of the ESI Act by filing an appropriate application.

The facts of the case are such that the petitioner in partnership with one P. Praveen Kumar was carrying on mechanical, electrical and electronic engineering works in the name of Isha Engineering with effect from 22-2-200. The petitioner registered his establishment with the respondent corporation i.e. Employees State Insurance i.e ESI. It was alleged that as the firm sustained losses, the partnership was closed in the year 2011 and since then the petitioner had no contacts with the Managing Partner. The petitioner failed to pay contributions for certain years and notices were issued which were not responded.  Thus, ESI determined contribution under Section 45 ESI Act and issued order under Section 45A as none of the partners were able to bring any record regarding closure of the establishment. Despite bringing the said fact to the notice of the respondents, the respondents were insisting for payment of the said amount. As such the petitioner was constrained to file the instant Writ Petition.

Counsel for the respondent submitted that the petitioner had got an alternative and effective remedy under Sections 75 of ESI Act. The petitioner filed the writ petition invoking the extraordinary jurisdiction of this court without availing the said remedy. As such the writ petition was liable to be dismissed on the above ground. It was further submitted that both the partners have overall supervision and power over the business of the firm and both of them were responsible for conducting the affairs of the business which would mean that the petitioner was not a sleeping partner. Even if the whereabouts of the Managing Partner were not known, the petitioner was the responsible person to clear the recovery dues. The respondent Corporation followed the due procedure as per the provisions of ESI Act, 1948. The petitioner failed to produce relevant documents or proof of evidence about the closure of the unit and prayed to dismiss the petition by vacating the interim order.

The Court relied on judgment Whirlpool Corporation v. Registrar of Trademarks, Mumbai, (1998) 8 SCC 1  and observed that alternative statutory remedy is not a constitutional bar to the High Court’s jurisdiction under Article 226 of the Constitution of India in at least three contingencies: (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is violation of principles of natural justice; or (iii) where the order or the proceedings are wholly without jurisdiction or the vires of an Act is challenged.

The Court further observed that in the present case the writ petition is not filed for enforcement of any of the Fundamental Rights nor there was any violation of the Principals of Natural Justice as show cause notice was issued to the petitioner and opportunities are provided to the petitioner to submit his written representation as well as for personal hearing, some of which were availed by him by sending his representative and some not availed by him even after receipt of notice. The order passed is not without jurisdiction nor are vires of any Act challenged in this case. The petitioner failed to produce the documentary evidence in support of his contention about closure of the firm before the concerned authorities. The petitioner directly approached this court by filing the writ petition without availing the statutory remedy of appeal provided under the Act. The High Court cannot adjudicate the disputed issues and such disputed issues are to be decided with reference to the original documents and evidences to be produced by the respective parties.

The Court thus held the Writ Petition is disposed of directing the petitioner to approach the EI Court under Section 75 of the ESI Act by filing an appropriate application and the EI Court is directed to dispose of the said application in accordance with law. The respondent shall not take any coercive steps for recovery of the purported due amount from the petitioner for a period of 60 days. [C. Chandra Mohan Reddy v. UOI, Writ Petition No. 30176 OF 2021, decided on 12-04-2022]

Arunima Bose, Editorial Assistant has reported this brief.